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Markets 51-100
Density=125

$11,400

Size=10,000

Underground=5% 5.5%

5.2% 4.8%

21, 1E

36.3%

0.7%

5. 2NV, INU

21, LE

10, 200

38.4

6.5

6.1

5.7

1.4

6. INV, 2NU

INV

21,1E

10,000

44.9

8.1

7.7

7.3

2.7

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3NV, 1EU

Size=7,500 #

Markets 101 +
Density=100

$10,000

Underground=5%
7.8% 7.5% 7.1%

7. INV, 2NU

11, 1E

41.5%

1.9%

8. 2NU

Size=7,500 #

9. 2N V

IN, 31,1E

10.2NU

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8

TABLE

Financial Rate of Return

(15 year life)

Copyright Fee Schedule No.
Size (Subscribers

1
2

3 in 5th Year)

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20-344 0 - 73 - 30

Income

Signals:

10.6

15000

Local viewing Test Imported by Cable

1 NV 2 NU 1 NV 2 I, 1E

25000

13.4

12.8

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tions we have reported.

Some communities will have higher incomes,

others will require extensive undergrounding, still others will

require high-cost local origination facilities, etc.

To measure the sensitivity of our findings for typical systems

to such variations, we have rerun all of the intermediate-sized

systems (tables 5 and 7) assuming that penetration is one-third

greater than would be expected on average, for each set of market

characteristics.

A variety of unmeasured factors can cause actual

penetration to vary above or below the average value predicted by

the penetration equation.

In increasing the average value by one

third we have in effect selected only the 10% of the cases in which

penetration is most favorable; in other words, nine out of 10 com

munities having the same signal lineups, income, etc. will have

lower penetration.

Turning to the results in Tables 9 and 10 we find that such

unusually high penetration is sufficient to produce at least one

profitable system in each type of market, at least if copyright

fees are absent.

Thus, 7,500-10,000 subscriber systems have some

chance of earning a going rate of return in the top 100 markets

only when local circumstances produce unusually favorable penetration.

We turn finally to the financial prospects for cable when

copyright fees are required.

The predominant effect of Schedule

3, the statutory fees proposed in s.644, is to reduce the financial

rate of return on total capital a full percentage point for profitable

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Markets 1-50 Density=200

Size=10,000

Underground=20%

INV

21,1E

$12,200

36.3%

10.2%

9.8%

9.4%

4.9%

31, 1E

11,400

32.9

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Markets 51-100 Density=150

Size=10,000

Underground=10%

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SIGNALS

5TH YEAR

Local

Viewing Test

Penetration

Imported
by cable

Family
Income

1. 3NV, LIU, IEV

2. 3NV, 1EU

3. 3NV, 11, 1IU

1 EV

11,1E

12,200

29.2

4. 3NV, 1EU

5. 2NV, INU

6. INV, 2NU

7. INV, 2NU

8. 2NU

IN, 11, 1E

10,000

73.9

20.1

19.7

19.3

12.3

# = minimum originator facilities and no advertising revenue.

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